Tesco has agreed to sell 150 of its Fresh & Easy stores to the investment company Yucaipa Companies.
The British supermarket giant, the world's third largest retailer, has been looking to dispose of its loss-making US food chain for some time.
Around 4,000 of Fresh & Easy's 5,000 employees are to transfer to the new business as part of the deal.
Tesco said in a statement that this is an "orderly and efficient exit from the US market".
Under the terms of the deal, Tesco will loan the new business around £80m.
Fresh & Easy, which operates 200 stores across California, Nevada and Arizona, has lost money since opening in 2007.
Tesco did not specify which stores are being transferred to Yucaipa, but it is understood the remaining 50 shops will be closed.
It will cost Tesco £150m to dispose of the Fresh & Easy brand, but part of that is a loan which may be paid back.
Also, if Yucaipa is sucessful and the business becomes profitable, Tesco has the option to buy a stake.
Yucaipa is a Los Angeles based private equity company focused on supermaket and restaurant businesses and is run by billionaire investor Ron Burkle.
In April of this year, Tesco reported its first fall in annual profits for 20 years.